RBI Urges Indian Oil Refiners to Limit Spot Dollar Purchases

• The three major state-run refiners (Indian Oil, Hindustan Petroleum, and Bharat Petroleum) control about half of India's 5.2 million barrels per day refining capacity and are being directed to channel FX purchases through SBI
• The rupee has recovered about 2% from record lows past 95 per dollar in late March to 93.20 per dollar following RBI interventions including dollar sales from reserves and restrictions on arbitrage trades
• Spot FX traders report an anecdotal decline in oil company activity in the spot market in recent days, suggesting the crisis-era measures are having an impact on reducing direct dollar demand

RBI Urges Indian Oil Refiners to Limit Spot Dollar Purchases

India's Reserve Bank (RBI) has directed state-run oil refiners to reduce spot dollar purchases and utilize a special credit line for foreign exchange needs, according to three sources. This revives crisis-era measures aimed at supporting the rupee, which has fallen over 3% to record lows in 2025, making it Asia's worst-performing major currency.

Key Drivers:

• Surge in oil prices and heavy foreign portfolio outflows have pressured the currency
• The rupee hit an all-time low past 95 per dollar in late March before recovering approximately 2% to 93.20 per dollar

Implementation Details:

State-run refiners—Indian Oil Corp, Hindustan Petroleum Corp, and Bharat Petroleum Corp—have been asked to access credit lines through State Bank of India (SBI). These three companies control roughly half of India's 5.2 million barrels per day refining capacity.

Refiners are encouraged to route daily dollar purchases through SBI exclusively rather than multiple banks, helping to reduce overall market impact. They can either buy dollars at the RBI reference rate or draw on the credit facility.

Market Impact:

The measures, reportedly in place for approximately two weeks, aim to reduce dollar demand from refiners—major buyers of foreign currency for oil imports. Three separate spot FX traders confirmed an anecdotal decline in oil companies' spot market activity recently.

The RBI has deployed multiple interventions including clamping down on arbitrage trades, barring Indian banks from offering non-deliverable forward contracts to corporates, and selling dollars from FX reserves to stabilize the currency amid ongoing geopolitical tensions.